Nonmarket Environment

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At this point, please complete Reading Assignment 1-- Market and Non-Market Environments. This is located under the Lesson 01 subheading in the Modules tab in Canvas. (Read everything through "Change in the Nonmarket Environment.")

The marketenvironment includes interactions between firms, suppliers, and customers, where the interactions are voluntary economic transactions, governed by markets and contracts.

The nonmarket environment, on the other hand, refers to the domain of concerns that cannot be controlled or managed through an individual's or organization's market-based interactions. These are social, political, regulatory, and legal considerations that affect an organization’s and/or individual's fortunes but occur outside of the market environment.

It is very important to note, as the reading makes clear, that market and nonmarket environments can and often do impact each other. In particular, market activity often precipitates nonmarket action, and nonmarket action often impacts the market environment. As Baron notes in the reading: "The problems encountered by Nike, Wal-Mart, BP, Microsoft, and Citigroup originated in their market environments, but the challenges to their operations came from the nonmarket environment."

GM ended production of its much loved, and much hated, Hummer in May of 2010. Demand dropped for many reasons outside of the manufacturer's market control, including rising fuel prices and public sentiment. As The Independent colorfully put it, "There was a time when the greed of the Hummer didn't bother many people. Its fans liked it precisely for the unabashed obesity of its styling. But it doesn't take a social scientist to realise that in these greener, poorer days, obesity spells obscene; the Hummer has become garish and anachronistic. Its demise was all but guaranteed."

The Life Cycle of Nonmarket Issues

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Nonmarket issues have the potential to evolve through various stages, which can be understood as a life cycle. Once an issue is identified, interest groups often form based upon their interests in potential outcomes. Some issues will evolve to a legislative stage, where lawmakers are lobbied to address the issue. Issues resulting in legislation will eventually be administered through a regulatory framework. And finally, in cases where there are disputes over the application of that regulatory framework, interested parties may seek enforcement through the regulatory framework and the court system.

Note that this lifecyle does not explain why issues progress as such, only that it is common for them to do so. Also keep in mond that nonmarket issues can end up having impacts outside of the public sector, e.g. public perception.

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